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Golden Rules

With the first of several deadlines looming in 2012, many operators and carriers that run in the state feel the increasing pressure of the state’s air regulations

As California strives to shape its air pollution regulations to meet upcoming federal Clean Air Act standards deadlines, the impact on trucking operators is a matter of wealth. If you can afford to retrofit your diesel-burning equipment or buy new vehicles on a regular schedule, you may feel relatively little impact. If you don’t have the financial means, you run the risk of falling short of compliance, facing stiff fines or going out of business.

Trucking companies and operators than run in the state feel the presence of the Air Resources Board, a division of the California Environmental Protection Agency, otherwise known as CARB. Depending on your type of operation, CARB rules affect you differently.

The California Trucking Association’s Michael Shaw questions some of the numbers and assumptions CARB used in developing its rules affecting trucking companies.

If you’re a national carrier that regularly turns over your fleet, you may hardly notice the regulations. If you’re an in-state linehaul company accustomed to running your trucks for a decade or longer, your business model may be disrupted. If you’re a solo truck owner hauling containers from the Port of Oakland, one set of CARB rules could cause you to retrofit or scrap your truck.

Overall, trucking’s cost to comply with clean-air regulations is estimated at more than $10 billion.

“A lot of companies out of state, particularly big carriers, are concerned about hours of service regulations and the truck driver shortage,” says Bob Ramorino, president of RoadStar Trucking. “We in California have a much different radar screen. At the top for us right now is environmental regulations.”

California isn’t the only state facing federal deadlines, but it’s the one state with the longest history of wrestling, often unsuccessfully, with dirty air caused by heavy traffic and trapped by unique geography. As such, the state’s approach to regulating business operations is monitored and often copied by other governments charged with controlling vehicle emissions.

“There’s definitely a recognition in other states of what’s going on in California,” says Mike Tunnell, director of environmental affairs at the American Trucking Associations. “One of the differences is you have a more balanced debate in other states. The decision-making process in other states rests in the legislature. In California it rests with the Air Resources Board.”

Trucking industry players are often critical of how CARB has developed the rules. They contend the agency doesn’t always listen to the industry in researching the topics or relies on dubious calculations in supporting its decisions.

“We’ve found the decision process on those regulations wasn’t entirely informed,” says Ron Hall, director of operations technology at carrier C.R. England. CARB chairman “Mary Nichols and her administration give preferential attention to university studies with comments on negative health impacts of pollution. It didn’t seem to be a true information gathering process. It seemed like decisions were made and opinions formed at that point.”

Michael Shaw, vice president of external affairs at the California Trucking Association, also finds fault with the CARB process and numbers employed in arriving at decisions. He contends the agency is out of touch with the problems trucking faces in meeting the regulations. “The challenge often is getting those drafting regulations and doing scientific analysis to understand their data is flawed outright,” he says. “In other cases they’re not looking at the full picture. In some cases they’re flat out ignoring the reality.”

Shaw gives the example of CARB’s research underpinning the requirement for trailer aerodynamic devices. The agency says that trailer skirt fuel economy benefits are based on trucks driving at freeway speeds 84 percent of the time in the state. “I don’t know if they’ve driven in Los Angeles, but most passenger cars can’t drive at freeway speeds 84 percent of the time,” he says.

Furthermore, research shows that the skirts achieve the tested fuel efficiency at 62 mph. Yet the speed limit for trucks in the state is 55 mph, Shaw notes.

In formulating its rules, CARB has imposed numerous amendments and deadline changes that have often confused truckers, says Joe Rajkovacz, director of regulatory affairs at the Owner-Operator Independent Drivers Association. “It’s not surprising to me there’s not the awareness in the trucking community of the timelines and compliance schedules,” he says.

Rajkovacz says he’s taken calls from operators who have quit hauling to California because of the regulatory environment. “Guys have to make serious choices by the end of the year if California is going to be part of their business model,” Rajkovacz says, “or they could find themselves facing much earlier compliance deadlines.”

Debra Dunn, president of the Oregon Trucking Association, says it’s hard for carriers to ignore California because of its $1.8 trillion economy. “If they could’ve turned over their fleets in the normal process of doing business, they would’ve preferred it that way than being required to do it in any one state.”

CARB has done a good job at involving trucking in the rulemaking process, says Tony Brasil, chief of the heavy duty diesel implementation branch of the agency. He says in advance of the statewide truck and bus rule, CARB mailed postcards to 180,000 fleets registered in the state, as well as state trucking groups and the American Trucking Associations. The agency schedules workshops across the state and presents webcasts of those sessions. It also meets with individual fleets to go over financials and business practices, he says. It maintains an information line at (866) 634-3735 and a website devoted to useful information for truck fleets: http://www.arb.ca.gov/truckstop. “It’s a fairly comprehensive way to let people know we’re working on a rule, what the rule is shaping up to look like, and we’ve adjusted rules considerably based on the feedback we get.”

Brasil acknowledges that meeting emissions standards forces many companies to change how they do business and spend money doing it. He says the agency tries to accommodate a company that needs more time to meet a deadline. Grants have been made available to help companies shoulder part of the cost of retrofits or new vehicles, although some of those resources have run out.

“We try to build in a number of things when we construct a rule that if there is a situation where something won’t work, we’re not making you replace the truck immediately,” Brasil says. “A key piece is finding the best balance between what’s technologically feasible and what is cost-effective and financially doable for businesses.”

Ramorino believes a better approach would have been to give trucking companies enough lead time to adjust their business model and turn over trucks more gradually. But he also says the industry dragged its feet in adapting to the regulations. “We fought it too long,” he says. “We fought the inevitable. It’s better to educate truckers, especially small truckers. [CARB’s] fallback is they have federal implementation standards to meet by 2015. They say we can’t give you more time.”

Blevins says that keeping pace with regulations is a time-consuming process. “There was a trucking company owner in here the other day who said he used to be in the trucking business — he still is, but now he says he’s in the business of regulating, understanding and complying with all of the regulations,” he says. “That’s how it is here in California.”

Here’s a look at various CARB rules and how different trucking companies are dealing with the regulations and the costs.

The Regs

Smoke test rules

Mountain Valley Express of Manteca, Calif., added rate increases in 2010 and this year is attaching a “clean air surcharge” to each invoice to help recoup the estimated $8 million cost of complying with CARB regulations, says President Scott Blevins.

Annual test applies to all California-based fleets with two or more diesel vehicles with a GVWR of more than 14,000 pounds. Diesel engine tests begin after the fourth model year and must be conducted with a SAE J1667 smoke test meter. Vehicles that fail to pass must be repaired and retested. Potential $500 fine.

Scott Blevins says his Mountain Valley fleet bought an opacity meter to do its own smoke tests, but he wonders if the annual testing is overkill, especially on 2010 engines. “Why do I have to smoke test a 2010 engine?” he asks.

Truck and bus rule

This is the regulation that will have the initial biggest financial impact on fleets operating in the state. Compliance schedules depend on truck model year, with pre-1996-engine trucks having the briefest compliance windows. Basically, trucks with 1996-2006 engines will be compliant until 2015 if retrofit with filters. From 2015-2023 most trucks would be scheduled to meet 2010 emissions standards. To ease the burden, CARB is allowing carriers to register a compliance schedule that phases in a percentage of their fleets over a few years. CARB estimates cost at $2 billion.

RoadStar Trucking is taking advantage of the fleet phase-in program to upgrade its fleet over four years. The 30-daycab distribution carrier is replacing five of its older trucks and retrofitting four others. By acting early, RoadStar gets from CARB a two-for-one credit for each retrofit, which translates into eight compliant trucks for this year.

In the past, the carrier followed a 10-year replacement cycle for its trucks, but the recession extended the schedule out to 12 to 13 years, fleet President Bob Ramorino says. “Without environmental regulations we would probably have looked at late-model used trucks,” he says. “That’s not an option because we have to meet the regulations.”

RoadStar Trucking President Bob Ramorino says meeting CARB regulations will make it harder for small trucking companies to survive. His Hayward, Calif., company may have to give up low-margin customers or court clients in other markets.

Ramorino says his company will be compliant through 2012, but he’s unsure of the future beyond next year. He’s talking with shippers about rate hikes, but that may be hard to stick. He says he “may have to walk from some business” or go farther afield to Southern California from his Bay Area base.

“This may not stay a mom and pop industry,” Ramorino says. “It’s going to be very difficult for the mom and pops to compete.”

Mountain Valley Express is under the gun to upgrade its 180-truck fleet by 2014. Mountain Valley’s Scott Blevins says the company is retrofitting 15 daycabs at about $14,000 each to remove the muffler and replace with a diesel particulate filter. The Manteca-based carrier is also receiving state Proposition 1B funding of $50,000 toward the purchase of each new truck that operates only in California.

By 2014, Blevins estimates the cost to his company will be as much as $8 million. How will he get it back? The company instituted rate increases of 3.5 percent in 2010 and 5.5 percent this year. Also, in July the carrier began adding a $1.95 “clean air surcharge” to each invoice. He’s hearing it from customers, but he says he had no choice. “I need help on fuel because of the high cost of diesel and I need help on the clean air issue because of the high cost of retrofitting,” he says.

Bettendorf Trucking, which runs 154 trucks and maintains terminals in California and Oregon, rolled the dice that CARB rules eventually could “be a game-ender” if it didn’t act, says Bob Phipps, maintenance supervisor. It solicited state grants to help pay for retrofits and new trucks. It also bought a filter cleaning system for diesel particulate filters and an air compressor to run it. “The bottom line is we are CARB-compliant for the next four years,” he says.

Greenhouse gas reduction

Container haulers such as those working the Port of Oakland face a CARB compliance schedule more accelerated than that imposed on over-the-road carriers in California.

A component of the state’s AB 32 law that mandates reducing pollutants to 1990 levels by 2020. Also known as the SmartWay rule, it requires aerodynamic devices, such as side skirts and fairings, on 53-foot and longer box trailers and SmartWay-approved low-rolling-resistance tires on trailers and tractors. There are exemptions for less-than-53-foot trailers and short-haul tractors and trailers operating within a 100-mile radius of a base terminal. All 2011 and newer tractors and dry van trailers already must be SmartWay approved or equipped with aerodynamic retrofits. On Jan. 1, 2013, SmartWay-approved tires will be required on tractors, while 2010 and older trailers must carry SmartWay certification or be equipped with fuel-saving aerodynamic technology; CARB estimates aggregate costs at $10 billion.

Mountain Valley Express will be outfitting its 53-foot trailers with side skirts and low-rolling-resistance tires, although Scott Blevins says the attachments won’t provide an economic benefit because the short-haul carrier doesn’t have high-enough average speeds. CARB gives the carrier a 150-mile exemption from its terminals but almost all of its hauls are longer. Blevins estimates a total $8 million investment through 2014.

Five-minute idling rule

State restricts idling to five minutes and the state regulation is one of more than 40 state and local ordinances targeting idling, according to the California Trucking Association. Rule pertains to sleeper trucks during rest periods as well. Fines range from $300 to $1,000 daily. Tickets have been issued, ­truckers say.

TRU rule

The transport refrigerated unit air toxic control measure requires all diesel-powered TRUs and gensets to meet specified emissions standards. Once a TRU passes testing, it’s in compliance on a seven-year schedule. Model year engines 2003 and older have to meet low-emission performance standards and then ultra-low-emission performance standards seven years later. Owners of 2003 and older engines who met the standards early in 2008 will get an extra year to comply with the ultra-low emissions standards. Model year 2004 engines must meet the ultra-low standard by Dec. 31 and 2005 and newer engines must meet the ultra-low standards by seven years after the model year. Fines vary from $300 to $1,000 and more. CARB estimates cost at $87 million to $156 million.

Refrigerated hauler C.R. England, which runs into California every day, feels an unintended impact of the TRU rules, Hall says. Because the company typically turns over its reefers every seven years, it’s been able to avoid dealing with CARB rules for TRUs, he says. An unintended consequence, however, is that the resale value of its used trailers has declined.

The carrier is outfitting its trailers with side skirts to comply with the greenhouse gas requirement. Hall says CARB told him the skirts wouldn’t be a financial burden because the skirts’ reported 6-7 percent lift in fuel efficiency would compensate for the cost over the trailer’s useful life. He says England testing showed otherwise.

“What we found is that the only time the skirt provides 6-7 percent fuel efficiency [increase] is in a heavy cross wind,” he says. “What we found is 3 percent. With a seven-year ownership cycle and 3 percent fuel savings, it’s not a strong positive return on investment — it’s only break-even.”

When the skirts were initially recommended, they were too rigid and not practical for heavy use, Hall says. CARB assumed the industry could live with that, he says. Since then the flexibility has improved enough to withstand direct impact without breaking. “The skirts now provide enough of an aerodynamic benefit that we can avoid having to sit and consider whether we could afford to go into California,” he adds.

Drayage truck rule

A two-phase regulation covering Class 7 and 8 trucks serving California ports, with additional requirements in place for the ports of Long Beach and Los Angeles.

Phase 1: After Dec. 31, all 2004 and older engines must be equipped with diesel particulate filters. After Dec. 31, 2012, all 2005-2006 engines must have PM filters.

Phase 2: By Jan. 1, 2014, Class 7 and 8 trucks must have engines that meet or exceed 2007 EPA emissions standards. Older vintage engines may be equipped with DPFs with technology that isn’t yet available, CARB acknowledges. The alternative is to buy a truck with a 2007 or newer engine.

Miguel Silva, manager of Horizon Freight System at the Port of Oakland, says most of the trucking industry in the state was given more time to meet CARB regulations, except for the small segment of drayage operators. He says manufacturing of engine filters to catch both particulate matter and nitrogen oxides stopped when CARB extended the deadlines. The filters haven’t been certified by CARB, a process that can cost manufacturers millions of dollars. “We got hit twice — one we didn’t get a modification of the rule and had to proceed with retrofitting, and two, there is nothing to retrofit into,” he says. “It went from [us] spending $10,000 to $15,000 on a filter to $85,000 for a used truck, overnight.”

As a result, Silva says the winners are larger carriers that can grab more market share and the Teamsters union, which is recruiting owner-operators to become employees of carriers.

Ready When It Rains

When it rains, it pours for California carriers. If they don’t have their hands full with trucking regulations, they also have to pay attention to the weather.

The federal Clean Water Act regulates discharges of pollutants into U.S. waters. In California the authority to regulate storm water runoff is handled by the State Water Resources Control Board and regional water quality control boards.

Facilities such as carrier terminals and truckstops are required to comply with the state regulations, which include monitoring runoff when it rains, filing a collection and testing plan, and documenting the results.

Scott Blevins of Mountain Valley Express says the company tests water that runs off at its different locations. The company is required to buy a permit for each of its locations. “We’ve proven we’re not a polluter,” Blevins says. “When does the testing requirement go away?”

Blevins says he has a vice president of maintenance and environmental affairs who is dedicated to matters such as storm water runoff monitoring. “If you don’t have someone on top of that every day and they show up for a surprise inspection, they’ll nail you every which way they can, and the fines are very substantial.”

CARB CASUALTY

Mike Evans figures he’s a casualty of complying with CARB regulations. A former driver and owner of Yolo Trucking in Northern California, Evans filed for bankruptcy in June and is considering his next move.

Mike Evans had to return these trucks to the bank and declare bankruptcy after he took a gamble on the economy and meeting California environmental requirements.

Evans has been in container hauling since 1990. In two decades since, business has often been booming, he says. His business grew for 18 straight years before the recession hit in 2007, but then took off again in 2008. At the peak he controlled 45 container-hauling trucks, including three of his own. “Everything started snowballing downhill,” he says.

Evans was caught in a financial bind in 2010 when he faced a CARB regulation requiring drayage truck operators to upgrade their vehicles. He had the choice of buying equipment to retrofit 2007 and older trucks to make them compliant until 2014 or trucks with 2007 engines that would be good until 2020. Since he knew he couldn’t get bank financing to pay for a retrofit that would be compliant for just two years, he bought 10 2008 trucks for $1 million and took on monthly payments of $15,000.

When other owner-operators complained they didn’t have the money to upgrade, CARB reconsidered and gave operators another year to raise money for equipment to comply with the emissions rules. Evans and other company owners who had gone into hock to meet the regulation were now competing with operators who weren’t saddled with debt.

“The economy and these regulations came together in a perfect storm,” Evans says. “I had the trucks, but I couldn’t raise my rates to pay for them, and our customers were applying pressure to reduce rates. I ran as long as I could. I ran out of money a year later. I had to give the trucks back.”